Paytm Payment Bank: The Beginning of the End of Currency Notes in India ?

Following Jack Ma’s (Alibaba founder) advice of dominating the country’s financial services market, Paytm’s CEO Vijay Shekhar Sharma is all set to launch India’s first mobile app-based Payment Bank. India’s first ever payment bank, dubbed as Paytm Payment Bank, would be launched by August 2016 which was earlier slated to launch in April 2016. A year ago, RBI granted payment bank’s licence to 11 entities including Vodafone, Airtel, Reliance Industries, and Paytm.

“The market is huge. You should chase the business that has tons of profit, if you see the top 50 companies in the world; they will be dominated by banking and financial services industry. So that’s where you should focus,” – Jack Ma’s adviced to Sharma.

If you are not following the thread and wondering why is Sharma following Jack Ma’s advice, then here it is; Jack Ma’s Alibaba Group holds a 40% stake in Paytm.

Paytm’s Payment Bank, however, will not act as a traditional bank that can be used for funds withdrawal. The Paytm Bank will be a digital banking system solely meant for buying products or services online and offline both without any notes exchanging hands.

The IT services company Wipro will aid Paytm in its endeavour by providing the requisite technological infrastructure and implementing core banking solutions. In addition to this Wipro will also administer other core features like regulatory reporting solutions and anti-money laundering.

Wipro’s one year contract with Paytm also includes managing data centers for Paytm’s Payment bank. Fraud-detection and customer-facing applications will be sought out by Paytm itself.

Payment banks aren’t allowed to issue credit cards to its customers. A person can have a current or savings account in Payment Banks with Rs. 1 lakh limit.

The over enthralled Paytm CEO Vijay Shekhar Sharma told the media that Paytm bank’s branches will serve more like headquarters in the different cities. Paytm bank will be entirely contingent on the mobile app.

Bank’s main focus is on financial inclusion. The company is planning to launch Debit Card with QR code for the people who are void of the smartphones. The company has plans to expand its merchant base from initial 85,000 merchants to 4 million merchants by the end of the next year, which will facilitate payments through Paytm wallet.

“Financial inclusion is our agenda and we are targeting 500 million users overall. Our banking will be entirely dependent on the mobile app. We will also have Paytm ka ATM, which won’t be like current one’s “ – Paytm CEO

According to Sharma, core team for Paytm Bank will comprise of 50-60 members. On being asked about the striking feature of Paytm’s Payment Bank compared to its competitors, Sharma said these banks will grasp data insights as well as marketplace customers.

“Paytm has built dominance in payments and we can continue to get most of the payments business portion. That is the edge that we have. Marketplace allows us to get access to merchants who are critical customer base for our BFSI services. It also provides us valuable consumer insights for both consumers as well as merchants. We will create our products based on this information” – Sharma

Beginning of the End of Currency Notes

Many countries in the world including China are opting for digital currency and blockchain space (that stores and manages bitcoin technology). Even in the developing countries like India, investors have started evaluating the potential of digital transactions. A few months ago Ratan Tata has invested in the US based digital currency startup Abra.

In an effort to improve India’s domestic digital economy, a new service called Swift India was launched lately. The service is developed by Swift, a global financial network, in a partnership with 9 banks to cater the domestic requirements of Indian financial services industry.

Besides all, RBI has also announced a scheme that will aid in improving the core banking solutions for urban cooperative banks in India. The prime focus of this initiative is to assist and provide technological support which in turn will help in standardizing the banking system.

The debut of the online banking sector will heat up the competition among the established banks that have started adopting new innovations and the emerging startups that are committed to redesign traditional practices. However, online-only banks will offer similar services akin to traditional banks but at a hefty price.

The traditional banks and tech-driven startups are investing heavily in innovation. Blockchain technology may aid in lowering the cost of a number of financial activities and in the near future it may also put an end to traditional banking.

On the global front, a number of firms including Ripple have started working on their global settlements through blockchain technology. Recently, Amazon Web Services has also partnered with NY-based Digital Currency Group to work on blockchain technology. According to former treasury secretary of the US, Larry Summers, Blockchain technology will speed-up the currency transactions from banks and other financial institutions.

Paytm is going global

Paytm’s is mentored by Alibaba Group’s visionary CEO Jack Ma as Alibaba holds 40% stake in the company with an investment of $900 million. No one can underestimate the capabilities of Jack Ma and with such a huge investment in Paytm, one can decipher that Paytm’s future seems glittering under the umbrella of Alibaba Group.

“ Paytm is building India’s most dominant mobile payment and commerce ecosystem. With the Alibaba and Ant Financial partnerships, we look to bring half a billion Indians to the mainstream economy and help millions of small businesses leverage this large m-commerce opportunity.” Sharma said

In an interview with Business Insider Paytm’s Founder and CEO Vijay Shekhar Sharma appeared quite confident and relaxed with his ongoing and upcoming ventures.

Sharma has plans to expand his business globally. Recently, Paytm has taken a groundbreaking initiative by partnering with Uber and Alipay that will allow Uber’s customers in abroad to pay for their rides using their native currency. However, as the RBI law that doesn’t allow Indians to make an online payment in foreign currency, Alipay will convert the Indian currency into dollars and allow Indians in abroad to make payment for their Uber rides through Paytm.